Skip to Content
Investing Specialists

Still Bullish (But Not Too Bullish)

Amid shifting consensus estimates, my moderately bullish U.S. GDP growth outlook remains relatively unchanged, writes Morningstar's Bob Johnson.

This week, markets got excited by the U.S. Federal Reserve's potential delay of tapering bond and mortgage purchase programs. The Fed chairman and a number of Fed governors went to great pains to stress that cutbacks in bond purchases will be economic-data driven, and the short-term rates would remain low indefinitely. This week's softer tone follows the release of minutes for its mid-June meeting, which suggested a lot of disagreement, with several governors lobbying for a quick end to bond purchases.

As the result of this week's Fed jawboning, U.S. equities are nearly back to their spring highs while the 10-year U.S. Treasury bond, at 2.6%, remains far closer to its daily high of 2.8% than the 1.6% level of just this last May. Emerging markets also remain under extreme pressure, with the MSCI Emerging Markets Index still down a rather surprising 12% year to date, even as the U.S.-based S&P 500 was up almost 18% over the same period through July 12.